How does Stablesats work?

Stablesats works by using the Bitcoin derivatives markets to create a synthetic US dollar. This is done through the use of a financial instrument called a perpetual inverse swap, which is essentially a contract between two parties to exchange the difference in the value of an asset (in this case, Bitcoin) between two points in time.

Stablesats are created by collateralizing Bitcoin and using it to open a perpetual inverse swap position. The perpetual inverse swap is designed to maintain a value of 1 US dollar, regardless of fluctuations in the Bitcoin price. This allows users to hold, send, and receive dollars in their Lightning wallets without the need for stablecoins or fiat integration.

In essence, Stablesats provide a way for Lightning users to protect themselves from fluctuations in the Bitcoin exchange rate and ensure that they can meet their financial obligations without having to constantly convert between Bitcoin and fiat currencies.

The video outlines the basic mechanics of this strategy.